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“It wasn’t the end of the world…so what now?” – Investec

The document discusses opportunities in fixed income investing given low global interest rates expected to remain low for longer. It notes active management will be crucial to achieve meaningful real returns. Opportunities still exist in areas like corporate credit and utilizing a global fixed income universe. Investec's fixed income funds take active approaches across different geographies and asset classes to generate income and diversification for investors. The Investec Absolute Income and Diversified Income funds are highlighted as alternatives providing higher returns than money markets over time through their flexible multi-asset fixed income mandates.

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Investec Asset Management It wasn’t the end of the world… so now what?” The Senate Group – 14th March 2013
Agenda ● Challenges facing low risk investors Morkel Kincaid ● “It wasn’t the end of the world… So now what?” Sumesh Chetty ● Questions and answers Page 2 | CONFIDENTIAL 12573
Developed market interest rates tell the story Developed market short-term interest rates: UK (Clearing bank rate, 0.50%), US (Fed funds rate, 0.25%), EU (repo rate, 0.75%) 6 5 4 Interest rates (%) 3 2 1 0 2007 2008 2009 2010 2011 2012 UK Clearning Banks Base Rate US Fed Funds Rate Euro Zone Repo Rate Source: I-Net Bridge Page 3 | CONFIDENTIAL 12573
A liquidity wave has driven risk assets over the short term 12-month asset class returns to end February 2013 135 SA Listed Property: 35.7% 130 125 120 FTSE/JSE All Share: 19.3% 115 SA All Bond Index: 14.3% 110 105 SA Cash 5.4% 100 95 Nov -12 Dec -12 Jul -12 Mar -12 May -12 Aug -12 Sep -12 Feb -12 Apr -12 Jun -12 Oct -12 Jan -13 Feb -13 FTSE/JSE All Share !BS(J203T,E,100) SA All Bond Index !BS(JAPI05[TP],E,100) SA Cash !BS(STFIND[CL],E,100) SA Listed Property !BS(J253T,E,100) 2010 2011 2012 Q3 2012 Q4 2012 Jan 2013 Feb 2013 YTD ALSI 18.98% 2.6% 26.7% 7.26% 10.34% 3.23% -1.89% 1.27% ALBI 14.96% 8.8% 16.0% 5.00% 2.60% 0.07% 0.66% 0.73% SA Cash 6.93% 5.7% 5.5% 1.36% 1.30% 0.43% 0.39% 0.82% Listed Property 29.62% 8.9% 35.9% 10.98% 2.75% 0.99% 4.64% 5.68% Source: I-Net Bridge Page 4 | CONFIDENTIAL 12573
It’s been a golden decade for SA asset classes Performance over 10 years (annualised) 20% 18.7% 18% 16% 14% 12% 10.4% 10% 8.2% 8% 6% 5.5% 4% 2% 0% Average General Equity Fund Average Bond Fund Average Money Market Fund Average Foreign Equity Fund Source: Morningstar, to 31 December 2012, based in Rands. Returns are calculated on a bid-to-bid basis, net of fees, with gross income reinvested; indices are all gross of fees Page 5 | CONFIDENTIAL 12573
Driving SA bond yields to record lows 7.2 9.0 JPMorgan GBI-EM Index (LHS) 7 R208 Govt bond (RHS) 8.5 6.8 R208 Government bond (%) 6.6 8.0 JPM GBI-EM (%) 6.4 6.2 7.5 6 7.0 5.8 5.6 6.5 5.4 5.2 6.0 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Source: Bloomberg as at 18 February 2013 and I-Net-Bridge Page 6 | CONFIDENTIAL 12573
Are income funds still relevant?
SA interest rates Keeping cash rates negative in real terms SA real returns 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Investec Asset Management Page 8 | CONFIDENTIAL 12573
Interest rates are expected to remain lower for longer Source: Investec Asset Management Page 9 | CONFIDENTIAL 12573
The market has changed Opportunities still exist... they're just harder to find
Opportunities exist to achieve meaningful real returns Active management Meaningful real returns Page 11 | CONFIDENTIAL 12573
Active management over the years has been crucial 20% Inflation linked bonds 18% Bonds 16% Cash 14% 12% 10% 8% 6% 4% 2% 0% -2% 2007 2008 2009 2010 2011 2012 Source: I-Net Bridge Page 12 | CONFIDENTIAL 12573
Active management Will be crucial in a low return environment SA fixed income team London fixed income team ● SA Duration ● Offshore Duration ● SA Credit ● Offshore Credit ● Listed Property ● Currencies exposure ● Rand Hedge ● EM exposure USD/ZAR exchange rate Source: I-Net Bridge and Investec Asset Management as at 31 December 2012. Page 13 | CONFIDENTIAL 12573
Opportunities exist to achieve meaningful real returns Active management Meaningful Corporate credit real returns Page 14 | CONFIDENTIAL 12573
Corporate bonds remain the bright spot Quality corporates offering higher yields than government bonds Returns in excess of government bonds1 ● Corporate SA has a very strong balance sheet ● Corporate bonds now offering 2-3% p.a above government bonds AAA We only invest in AA investment grade instruments A BBB 1Creditspreads per rating band calculated as average of spreads of each bond against its companion benchmark government bond Source: RMB as at 31 December 2012. Page 15 | CONFIDENTIAL 12573
Opportunities exist to achieve meaningful real returns Active management Meaningful Corporate credit real returns A global universe – a larger opportunity set Page 16 | CONFIDENTIAL 12573
Global fixed income offers a broad opportunity set Annual Returns in USD for different fixed income asset types – best to worst 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 13.5% I8.9% 22.0% 27.9% 23.0% 6.3% 15.2% 18.1% 13.9% 60.9% 15.7% 9.6% 18.9% Highest ● Returns vary return significantly across the 9.2% 6.7% 11.6% 18.5% 12.1% 3.7% 10.8% 11.5% 10.1% 22.0% 15.3% 5.2% 16.8% range of fixed income 6.6% 4.2% 11.4% 16.9% 11.3% 3.4% 6.9% 9.0% 2.9% 16.3% 7.4% 5.0% 10.8% opportunities 2.0% 3.5% I8.4% 6.3% 5.5% 3.4% 5.2% 5.4% -4.8% 4.4% 5.8% 3.2% 2.0% -2.6% 3.2% 1.8% 2.3% 3.5% 2.8% 3.8% 3.4% -5.2% 0.3% 5.2% 0.2% 1.5% Lowest ● We look to hold assets -5.3% -3.5% -1.0% 1.2% 1.5% -9.2% 3.1% 2.1% -26.6% -3.7% 0.3% -1.8% 0.2% return that suit the economic Emerging market debt Investment grade corporate bond environment and that offer value Treasuries Cash Global High yield corporate bonds Source: Investec Asset Management, Bloomberg BBA 1 month LIBOR, Citigroup Treasury Index, Citigroup WGBI-ex US, JP Morgan ELMI+ in USD to 2003, JP Morgan GBI-EM Global Diversified in USD from 2003, Merrill Lynch Global HY Index hedged into USD, Merrill Lynch Global Corporate Index hedged into USD Page 17 | CONFIDENTIAL 12573
Overall expect lower and narrower returns, but opportunities still exist Expected 12 month returns Cash 5.0% Bonds/ILB’s 6.8% Corporate 8.8% CPI 5.8% Property yield 7.4% Page 18 | CONFIDENTIAL 12573
Investec Asset Management South African Funds – core range Fixed Income Multi-Asset Equity Value Equity Expected Return Managed Opportunity Cautious Managed Diversified Income Opportunity Income Absolute Income Money Market Low Moderate High Volatility Page 19 | CONFIDENTIAL 12573
SA fixed income funds Different strategies have different objectives Fund strategy Investec Fund Sector Money market alternatives Investec Absolute Income SA Multi-Asset Income Domestic only – Fixed Income Investec Opportunity Income SA Multi-Asset Income Solution Complete - Fixed Income solution Investec Diversified Income SA Multi-Asset Income (incl. international) Page 20 | CONFIDENTIAL 12573
Globally integrated fixed income investment team SION 01/12/11 We are unique to the SA market Text size 15 Main W 16 Fixed Income & Currency Capability Leaders ● Globally integrated team Second W 8 John Stopford – Co-Head of André Roux – Co-Head of Global Global Fixed Income Fixed Income ● 37 investment professionals Photo 2.2 Textbox 5.8 Multi-strategy & Developed Markets Emerging Markets ● Average of 13 years Text size 12 Peter Eerdmans – Emerging Markets John Stopford – Allocation & Debt & Currency investment experience Spacing 0.1 Text size 12 Developed Credit 12 Investment Specialists 4 Investment Specialists ● Specialist teams with 8 Main W 16 Second W clear Malcolm Charles – Southern African Rates accountability and 4 Investment Specialists Photo 1.4 Russell Silberston – Developed responsibility Textbox 6.6 Rates & Currency Simon Howie – Text size 11 7 Investment Specialists South Africa & Frontier Credit 4 Investment Specialists André Roux Economic Research Thanos Papasavvas Fixed Income & Currency Strategist 5 Fixed Income & Currency Dealers Page 21 | CONFIDENTIAL 12573
Investec Absolute Income Fund Compelling alternative to money market Annualised performance 10% Investec Absolute Income 9% SA money market sector average 8% 7% 6% 5% 4% 3% 2% 1% 0% 1 year 3 years p.a. 5 years p.a. Since inception* Investec Absolute Income 7.1% 7.1% 8.6% 8.8% SA money market sector average 5.4% 5.9% 7.7% 8.0% Source: Morningstar as at 31 December 2012. Returns are calculated on a bid-to-bid basis, net of fees, with gross income reinvested. Market indices are gross of fees. Periods less than one year are not annualised. *Inception date: 1 July 2003 Page 22 | CONFIDENTIAL 12573
Investec Diversified Income Fund Complete fixed income solution ● A diversified fixed income retail fund, established in 2008 ● Globally integrated approach drawing on the best investment ideas from the SA and London teams ● Diversified strategic allocation to multiple sources of uncorrelated fixed income returns ● Actively manages the asset allocation between cash, government bonds, inflation linked bonds, corporate bonds and listed property in SA and abroad ● Offshore assets are actively managed with currency hedging Page 23 | CONFIDENTIAL 12573
Investec Diversified Income Fund Complete fixed income solution for SA investors Portfolio allocation Corporate bonds: Inflation- Property, Overweight (40%) Linked Bonds, 2.0% 1.0% Foreign Exposure (incl. Credit linked Corporate notes): Bonds, 15.0% Government Bonds, 24.0% Actively managed Floating Rate Money market: Notes, 23.0% NCDs = higher income yields and liquid Money Market Government bonds and Property: (NCDs), Foreign 22.0% Underweight Exposure, 13.0% Duration: 1year and 3 months Yield: 5.8% Source: Investec Asset Management 22 February 2013 Page 24 | CONFIDENTIAL 12573
Investec Diversified Income Fund Complete fixed income solution for SA investors 12% 10% 8% 6% 4% 2% 0% 3 months 1 year 3 years p.a. Investec Diversified Income 1.8% 9.6% 9.8% ALBI 1-3 1.3% 5.5% 6.8% STeFI 1.3% 5.5% 6.0% Source: Morningstar as at 31 January 2013. Returns are calculated on a bid-to-bid basis, net of fees, with gross income reinvested Inception date: 29 August 2008 Page 25 | CONFIDENTIAL 12573
Summary ● Challenging macroeconomic conditions prevail − Low / negative real returns − Lower and narrower returns from SA income assets ● Opportunities exist − Active management − Corporate credit − Global diversification ● Investec Asset Management offers a globally integrated and experienced team managing a complete fixed income solution Page 26 | CONFIDENTIAL 12573
Biographies Sumesh Chetty Years updated 2013 Portfolio Manager 6 years with the firm 11 years of industry experience Sumesh is a portfolio manager at Investec Asset Management with responsibility for our absolute return strategies. He is co-portfolio manager of the Investec Cautious Managed Fund and the Investec Absolute Balanced Fund. He joined the firm in 2007 from Metropolitan Asset Managers where he managed the Metropolitan Absolute Return Fund from 2005. Before joining Metropolitan, Sumesh spent three years as an investment actuary at Metropolitan Employee Benefits, where he was responsible for managing smooth bonus funds. Sumesh began his career at Swiss Re Life & Health, where he spent over three years as an actuarial specialist. Sumesh graduated from the University of Cape Town with a Bachelor of Business Science (Honours) degree in Actuarial Science and a Post Graduate Diploma in Actuarial Science. He is also a Fellow of the Institute of Actuaries in the United Kingdom. Page 27 | CONFIDENTIAL 12573
It wasn’t the end of the world… So what now? Sumesh Chetty, Portfolio Manager
Agenda ● Our investment philosophy ● Challenges facing investors ● Implications for portfolio construction Page 29 | CONFIDENTIAL 12573
South Africa Absolute Return team Co-Chief Investment Officers - John McNab, Domenico Ferrini Experienced Portfolio Managers – 20 managers Equity Fixed Income Absolute Return Growth: Richard Middleton André Roux, John Stopford Clyde Rossouw Value: John Biccard, Rajay Duration: Malcolm Charles Sumesh Chetty Ambekar High Income: Vivienne Taberer Active Quants: Grant Irvine-Smith Cash: Lisa McLeod General: Chris Freund Credit: Simon Howie, Marshall Sector: Angelique de Rauville, Neil Brown, Steven Loubser Clyde Rossouw Sumesh Chetty 14 years with the firm 6 years Investec Stuart-Findlay 19 years experience 11 years experience RI: Malcolm Gray Common research platform – 21 analysts Implementation and pre-trade compliance – 3 members Dealing – 5 dealers Performance measurement, attribution & risk – 6 analysts As at November 2012 Page 30 | CONFIDENTIAL 12573
Investec Opportunity Fund Long term consistent outperformance Investec Opportunity Fund relative to new sector: South Africa Multi Asset – High Equity Source: Morningstar as at January 2013. Page 31 | CONFIDENTIAL 12573
Investec Opportunity and Cautious Managed Funds A proven investment process Risk vs Return scatterplot: 10 years to 31 December 2012 19% Risk-cognisant Investec Opportunity 17% SA equity general sector average 15% SA AA variable equity Return p.a. 13% sector average 11% Quality-centric SA Bond sector average 9% SA Money Market sector Foreign equity general 7% average sector average 5% 0% 2% 4% 6% Valuation-bias 8% 10% 12% 14% 16% Standard Deviation p.a. Source: Morningstar as at 31 December 2012. Returns are calculated on a bid-to-bid basis, net of fees, with gross income reinvested. Market indices are gross of fees. Page 32 | CONFIDENTIAL 12573
Investec Opportunity and Cautious Managed Funds Our investment philosophy Outperforming inflation with the lowest possible risk Risk is defined primarily as the risk of losing money Downside volatility is more detrimental than overall volatility Page 33 | CONFIDENTIAL 12573
The rules of absolute investing Rule number 1: Never lose money Rule number 2: Never forget rule # 1 Why? R 100 R 100 -30% +43% R 70 Start Year 1 Year 2 Page 34 | CONFIDENTIAL 12573
High quality opportunities with a valuation bias ● We prefer predictable cash flows over Brand / Balance uncertainty Cash Flow Competitive Management Sheet Advantage ● We only buy uncertainty if paid handsomely for it ● ‘Cheap’ is not ‘value’ Quality ● We prize franchise value highly ● We do not change our minds often Emphasis on quality and consistency to ensure long-term sustainable growth Page 35 | CONFIDENTIAL 12573
It wasn’t the end of the world… So what now? We are cautiously optimistic • Global risks still remain • Local risks have increased • Market sentiment appears overly bullish Select opportunities can still be found Page 36 | CONFIDENTIAL 12573
% 12573 10 12 14 16 18 20 6 8 Jan-94 Jun-94 Nov-94 Apr-95 Sep-95 Feb-96 Page 37 | CONFIDENTIAL Jul-96 Dec-96 May-97 Oct-97 Mar-98 Source: I-Net Bridge, to 31 December 2012. Aug-98 Jan-99 Limited potential returns Jun-99 Nov-99 Apr-00 Sep-00 Feb-01 Jul-01 Dec-01 Bond yields at historic lows May-02 Yield on the generic 10 year government bond Oct-02 Mar-03 Aug-03 Jan-04 Jun-04 Nov-04 Apr-05 Sep-05 Feb-06 Jul-06 Dec-06 May-07 Oct-07 Mar-08 Aug-08 Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12
Low short term rates resulting in negative real returns Source: Investec Asset Management Page 38 | CONFIDENTIAL 12573
Investec Cautious Managed Fund Putting your cash to work – the search for real income Inflation-linked bonds as an alternative to cash 120 118 116 114 112 110 108 106 104 102 100 Mar-12 Apr-12 May-12 Jul-12 Feb-12 Oct-12 Jan-12 Jun-12 Aug-12 Sep-12 Nov-12 Dec-12 Inflation-linked bonds Cash Source: I-Net Bridge; Investec Asset Management to 31 December 2012. Page 39 | CONFIDENTIAL 12573
Building a better bond portfolio Our best Inflation Linked Bond British American Tobacco PLC • Global tobacco manufacturer with dominant position in many international markets • 35% ROE and Operating Margins of 35% • Global Drive Brands (Dunhill, Pall Mall, Kent, Lucky Strike) – the key drivers of growth • On-going share buybacks • Dividend Yield of 3.8% • FCF yield of 4.8% Earnings per share growth of 12% p.a. Dividends per share growth of 14% p.a. Page 40 | CONFIDENTIAL 12573
12573 0.5 0.7 0.9 1.1 1.3 1.7 1.5 Jan-03 Apr-03 Jul-03 Oct-03 Source: I-Net Bridge. Jan-04 Page 41 | CONFIDENTIAL Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Resources relative to Industrials Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 relative to industrials Resources expensive Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Resources cheap Jan-12 relative to industrials Apr-12 Jul-12 Stretched valuations in select parts of the SA equity market Oct-12 Jan-13
Bottom-up stock selection Historic PE and subsequent real total returns Investec Opportunity Fund ALSI Source: I-Net Bridge. Page 42 | CONFIDENTIAL 12573
Investec Opportunity Fund Quality companies, reasonable valuations Top 10 holdings as % of fund Company % Assore 5.7 British American Tobacco 3.9 Sasol 3.5 MTN Group 3.2 Newgold Issuer 3.2 Tiger Brands 3.0 Impala Platinum Holdings 2.6 Steinhoff International Holdings 2.5 Santam 2.0 Richemont 1.7 Total 31.3 Source: I-Net Bridge and Investec Asset Management as at 31 December 2012 Page 43 | CONFIDENTIAL 12573
Associated Ore A great asset in our portfolio, held for 8 years 2.5 Assore’s profits have grown faster than Anglos by 20% p.a. But you still only pay 10 times 2 earnings! 1.5 EPS T12M (ASR/AGL) Anglo shares outstanding have grown 6X Last Px (ASR/AGL) Before buying back shares in 2007 1 0.5 0 No change in Assore since 1950 2000/06/01 2001/02/01 2001/10/01 2002/06/01 2003/02/01 2003/10/01 2004/06/01 2005/02/01 2005/10/01 2006/06/01 2007/02/01 2007/10/01 2008/06/01 2009/02/01 2009/10/01 2010/06/01 2011/02/01 2011/10/01 2012/06/01 11 11 Source: I-Net Bridge Page 44 | CONFIDENTIAL 12573
12573 "Cash costs+sustaining capex" (R/5PGE+Au oz) 2,000 4,000 6,000 8,000 10,000 12,000 14,000 0 Mimosa Two rivers Platinum Mile Page 45 | CONFIDENTIAL Zimplats Mototolo West tailings Modikwa Marula R10,500/ounce Impala Boschkoppie Mogalakwena Platinum industry cost curves Amandelbult Impala Platinum is our preferred platinum stock Kroondal Union Lonmin Northam Rustenburg Marikana CTRP
SA specific risks have been on the rise • Labour unrest 9.5 • Rating agency downgrades 9.0 • Rand depreciation 8.5 • Political uncertainty • Risk of foreign outflows 8.0 7.5 7.0 May-12 May-12 Apr-12 Feb-12 Mar-12 Mar-12 Jul-12 Jul-12 Oct-12 Oct-12 Aug-12 Sep-12 Nov-12 Dec-12 Dec-12 Jan-12 Jan-12 Jun-12 Jan-13 Source: I-Net Bridge. Page 46 | CONFIDENTIAL 12573
Offshore Equity High quality global franchises at attractive valuations Top 10 Name Weight PE FCF Yield DY EM % Sales Nestlé (Nescafe, Maggi ,Nesquik) 5.6% 16.6 4.5 3.7 41% Japan Tobacco (Camel, Winston, Mild Seven, B&H) 5.1% 13.4 11.4 3.0 28% Samsung Electronics (Samsung) 4.8% 8.2 4.8 0.6 75% Imperial Tobacco Group (Davidoff, Gauloises, West) 4.8% 11.1 5.8 4.9 40% Microsoft Corp (Windows, Office, Xbox, Bing) 4.5% 8.8 11.7 3.5 13% Reckitt Benckiser Group (Nurofen, Finish, Vanish, Dettol, Strepsils) 4.4% 12.5 6.6 3.4 35% Unilever (Axe, Knor, Blue Band, Lipton, Dove, Lux, Flora, Omo) 4.4% 17.2 5.4 3.4 55% Anheuser-busch Inbev ( Budweiser, Beck's, Stella Artois ) 4.3% 17.4 7.7 2.6 56% International Business Machines (IBM) 4.1% 11.7 6.8 1.8 21% Coach (Coach) 4.0% 14.1 6.6 2.1 13% Total/Average 46.0% 13.1 7.1 2.9 37.7% Source: Investec Asset Management to 31 December 2012. Page 47 | CONFIDENTIAL 12573
Nestlé – the quintessential franchise stock Nestle has outperformed the market through multiple EM is adding 1bn new emerging market consumers by cycles due to compounding and steadily increasing 2020 exposure to EM Share price: source of 1973 - 2012 return 7 000 50 6 000 45 Business (profit) growth 8.1% 40 5,000 5 000 Valuation uplift 2.7% 35 % of sales Population (m) 4 000 30 CAGR % 13.1% 25 3 000 20 2 000 15 10 1 000 Log scale 5 500 0 0 2000 2005 2010 2015 2020 % of Nestle Sales EM Population (Million) Develop Market Population(Million) 50 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Feb-97 Feb-98 Feb-99 Mar-01 Mar-02 Mar-03 Mar-04 Feb-96 Feb-00 Mar-05 May-11 May-12 Jan-90 Jan-92 Jan-93 Jan-94 Jan-91 Jan-95 MSCI World Nestle Source: DataStream, company data, Investec Asset Management, USD Total Return Index This is not a buy or sell recommendation for any particular stock Page 48 | CONFIDENTIAL 12573
Investec Cautious Managed Fund Income generation and real returns at lower volatility Commodities - ● High quality stocks to provide real Offshore - gold SA Equities capital growth in volatile markets cash 4.5% with lower levels of risk 3.5% Domestic - cash Domestic - 29.4% ● Preferred asset class equities 18.7% Offshore ● High quality global franchises on Equities attractive valuations ● Uncorrelated returns – provides Gold protection in uncertain markets Offshore - equities 18.9% Domestic - SA Fixed ● Bonds and ILBs provide a superior bonds return to cash which yields a 25.0% interest negative real return Source: Investec Asset Management as at 31 December 2012 Page 49 | CONFIDENTIAL 12573
Investec Opportunity Fund Long term real wealth creation Investec Opportunity Fund ● High quality stocks to provide real Domestic - property, 0.7% SA Equities capital growth in volatile markets Offshore - Domestic - with lower levels of risk bonds, 2.6% equities, Offshore - 41.6% cash, 3.1% ● Preferred asset class Commodities - Offshore ● High quality global franchises on Gold, 3.2% Equities attractive valuations Domestic - bonds, 14.9% ● Uncorrelated returns – provides Gold protection in uncertain markets Domestic - cash , 15.8% Offshore - SA Fixed ● Bonds and ILBs provide a superior equities, 18.1% return to cash which yields a interest negative real return Source: Investec Asset Management as at 31 December 2012 Page 50 | CONFIDENTIAL 12573
Superior long-term returns A focus on risk, quality and valuation 19% Investec Opportunity Risk 17% SA equity general sector average cognisant 15% SA AA variable equity Return p.a. 13% sector average Quality 11% centric SA Bond sector average 9% SA Money Market sector Foreign equity general 7% average sector average Valuation bias 5% 0% 2% 4% 6% 8% 10% 12% 14% 16% Standard Deviation p.a. Source: Morningstar as at 31 December 2012. Page 51 | CONFIDENTIAL 12573
Investec Asset Management International Funds – Core Range Global Fixed Income Global Multi-Asset Global Equity Global Strategic Equity (USD) Worldwide Equity Feeder (ZAR) Expected Return Global Equity (USD) Global Equity FoF (ZAR) Global Franchise (USD) Global Strategic Managed Feeder (ZAR) Global Strategic Managed (USD) Global Opportunity Income FoF (ZAR) Money Market (USD, EUR, GBP) Low Moderate High Volatility Page 52 | CONFIDENTIAL 12573
Investec GSF Global Franchise Fund ● Highly differentiated 'global franchise' philosophy ● Concentrated portfolio and not benchmark constrained ● Low historic correlation with traditional benchmarks ● Record of long-term outperformance: − participating meaningfully in up markets − with smaller draw-downs in down markets − lower than average absolute volatility ● Managed by a globally integrated investment team based in London and Cape Town We seek to invest in companies with business models which can provide some certainty in uncertain markets Page 53 | CONFIDENTIAL 12573
Investec GSF Global Franchise Fund Performance track record Annual performance in USD Cumulative performance in USD 40% 36.1% 40% 30.0% 28.8 30% 30% 14.7% 16.1% 20% 20% 11.8% 5.9% 7.4% 10% 10% 5.9% 5.3% 0.3 3.9% 4.6% 0% 0% -10% -10% -5.9% -20% -20% -30% -30% -40% -40% -32.6% -50% -50% -40.7% -60% 2007 (Apr) 2008 2009 2010 2011 2012 2013 (YTD) Apr 07 Jan 08 Oct 08 Jul 09 Mar 10 Dec 10 Sep 11 Jun 12 Feb 13 Investec GSF Global Franchise A Acc Investec GSF Global Franchise A Acc MSCI AC World NR (MSCI World NR pre 1/10/11) MSCI AC World NR (MSCI World NR pre 1/10/11) Since inception 1 month 3 months YTD 1 year 3 years p.a. 5 years p.a. p.a.* Investec GSF Global Franchise A Acc 1.2% 5.2% 5.3% 13.6% 11.6% 5.6% 5.0% MSCI AC World NR (MSCI World NR pre 1/10/11) 0.0% 7.0% 4.6% 9.3% 9.5% 1.4% 0.4% Relative performance 1.2% -1.8% 0.7% 4.4% 2.1% 4.2% 4.6% Quartile ranking 1 3 2 1 1 1 1 Past Performance figures are not audited and should not be taken as a guide to the future Source: Lipper, dates to 28 February 2013, NAV based, (inclusive of all annual management fees but excluding any initial charges), gross income reinvested, in USD *Inception date: 10 April 2007 Page 54 | CONFIDENTIAL 12573
Thank you www.investecassetmanagement.com
Disclaimer This document or any of its content may not be in whole or in part, be copied, modified, distributed, retransmitted, redistributed, or released to any third party. The user represents and warrants that it will not use or permit the use of the document or any of its content for any purpose other than authorised internal use and warrants that it will not, without the prior written consent of Investec Asset Management, directly or indirectly redistribute, or knowingly facilitate redistribution of, all or any portion of the document. All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an advisor or in a fiduciary capacity. No one should act upon such information or opinion without appropriate professional advice after a thorough examination of a particular situation. We endeavour to provide accurate and timely information but we make no representation or warranty, express or implied, with respect to the correctness, accuracy or completeness of the information and opinions. We do not undertake to update, modify or amend the information on a frequent basis or to advise any person if such information subsequently becomes inaccurate. Any representation or opinion is provided for information purposes only. Investec Asset Management will not be held liable or responsible for any direct or consequential loss or damage suffered by any party as a result of that party acting on or failing to act on the basis of the information provided by or omitted from this document. This document may not be amended, reproduced, distributed or published without the prior written consent of Investec Asset Management. In the event that specific collective investment schemes in securities (unit trusts) are mentioned please refer to the relevant fact sheet in order to obtain all the necessary information in regard to that unit trust. Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to the future. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of charges, fees and adviser fees is available on request from the manager. Additional adviser fees may be paid and if so, are subject to the relevant FAIS disclosure requirements. Forward pricing is used. The scheme trustee is FirstRand Bank Ltd (011) 371 2111. Certain Investec Asset Management funds are offered as long-term insurance policies issued by Investec Assurance Limited, a registered insurer in terms of the Long-term Insurance Act. Investec Asset Management is an authorised financial services provider. Page 56 | CONFIDENTIAL 12573

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“It wasn’t the end of the world…so what now?” – Investec

  • 1.
    Investec Asset Management Itwasn’t the end of the world… so now what?” The Senate Group – 14th March 2013
  • 2.
    Agenda ● Challenges facinglow risk investors Morkel Kincaid ● “It wasn’t the end of the world… So now what?” Sumesh Chetty ● Questions and answers Page 2 | CONFIDENTIAL 12573
  • 3.
    Developed market interestrates tell the story Developed market short-term interest rates: UK (Clearing bank rate, 0.50%), US (Fed funds rate, 0.25%), EU (repo rate, 0.75%) 6 5 4 Interest rates (%) 3 2 1 0 2007 2008 2009 2010 2011 2012 UK Clearning Banks Base Rate US Fed Funds Rate Euro Zone Repo Rate Source: I-Net Bridge Page 3 | CONFIDENTIAL 12573
  • 4.
    A liquidity wavehas driven risk assets over the short term 12-month asset class returns to end February 2013 135 SA Listed Property: 35.7% 130 125 120 FTSE/JSE All Share: 19.3% 115 SA All Bond Index: 14.3% 110 105 SA Cash 5.4% 100 95 Nov -12 Dec -12 Jul -12 Mar -12 May -12 Aug -12 Sep -12 Feb -12 Apr -12 Jun -12 Oct -12 Jan -13 Feb -13 FTSE/JSE All Share !BS(J203T,E,100) SA All Bond Index !BS(JAPI05[TP],E,100) SA Cash !BS(STFIND[CL],E,100) SA Listed Property !BS(J253T,E,100) 2010 2011 2012 Q3 2012 Q4 2012 Jan 2013 Feb 2013 YTD ALSI 18.98% 2.6% 26.7% 7.26% 10.34% 3.23% -1.89% 1.27% ALBI 14.96% 8.8% 16.0% 5.00% 2.60% 0.07% 0.66% 0.73% SA Cash 6.93% 5.7% 5.5% 1.36% 1.30% 0.43% 0.39% 0.82% Listed Property 29.62% 8.9% 35.9% 10.98% 2.75% 0.99% 4.64% 5.68% Source: I-Net Bridge Page 4 | CONFIDENTIAL 12573
  • 5.
    It’s been agolden decade for SA asset classes Performance over 10 years (annualised) 20% 18.7% 18% 16% 14% 12% 10.4% 10% 8.2% 8% 6% 5.5% 4% 2% 0% Average General Equity Fund Average Bond Fund Average Money Market Fund Average Foreign Equity Fund Source: Morningstar, to 31 December 2012, based in Rands. Returns are calculated on a bid-to-bid basis, net of fees, with gross income reinvested; indices are all gross of fees Page 5 | CONFIDENTIAL 12573
  • 6.
    Driving SA bondyields to record lows 7.2 9.0 JPMorgan GBI-EM Index (LHS) 7 R208 Govt bond (RHS) 8.5 6.8 R208 Government bond (%) 6.6 8.0 JPM GBI-EM (%) 6.4 6.2 7.5 6 7.0 5.8 5.6 6.5 5.4 5.2 6.0 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Source: Bloomberg as at 18 February 2013 and I-Net-Bridge Page 6 | CONFIDENTIAL 12573
  • 7.
    Are income fundsstill relevant?
  • 8.
    SA interest rates Keepingcash rates negative in real terms SA real returns 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Investec Asset Management Page 8 | CONFIDENTIAL 12573
  • 9.
    Interest rates areexpected to remain lower for longer Source: Investec Asset Management Page 9 | CONFIDENTIAL 12573
  • 10.
    The market haschanged Opportunities still exist... they're just harder to find
  • 11.
    Opportunities exist toachieve meaningful real returns Active management Meaningful real returns Page 11 | CONFIDENTIAL 12573
  • 12.
    Active management overthe years has been crucial 20% Inflation linked bonds 18% Bonds 16% Cash 14% 12% 10% 8% 6% 4% 2% 0% -2% 2007 2008 2009 2010 2011 2012 Source: I-Net Bridge Page 12 | CONFIDENTIAL 12573
  • 13.
    Active management Will becrucial in a low return environment SA fixed income team London fixed income team ● SA Duration ● Offshore Duration ● SA Credit ● Offshore Credit ● Listed Property ● Currencies exposure ● Rand Hedge ● EM exposure USD/ZAR exchange rate Source: I-Net Bridge and Investec Asset Management as at 31 December 2012. Page 13 | CONFIDENTIAL 12573
  • 14.
    Opportunities exist toachieve meaningful real returns Active management Meaningful Corporate credit real returns Page 14 | CONFIDENTIAL 12573
  • 15.
    Corporate bonds remainthe bright spot Quality corporates offering higher yields than government bonds Returns in excess of government bonds1 ● Corporate SA has a very strong balance sheet ● Corporate bonds now offering 2-3% p.a above government bonds AAA We only invest in AA investment grade instruments A BBB 1Creditspreads per rating band calculated as average of spreads of each bond against its companion benchmark government bond Source: RMB as at 31 December 2012. Page 15 | CONFIDENTIAL 12573
  • 16.
    Opportunities exist toachieve meaningful real returns Active management Meaningful Corporate credit real returns A global universe – a larger opportunity set Page 16 | CONFIDENTIAL 12573
  • 17.
    Global fixed incomeoffers a broad opportunity set Annual Returns in USD for different fixed income asset types – best to worst 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 13.5% I8.9% 22.0% 27.9% 23.0% 6.3% 15.2% 18.1% 13.9% 60.9% 15.7% 9.6% 18.9% Highest ● Returns vary return significantly across the 9.2% 6.7% 11.6% 18.5% 12.1% 3.7% 10.8% 11.5% 10.1% 22.0% 15.3% 5.2% 16.8% range of fixed income 6.6% 4.2% 11.4% 16.9% 11.3% 3.4% 6.9% 9.0% 2.9% 16.3% 7.4% 5.0% 10.8% opportunities 2.0% 3.5% I8.4% 6.3% 5.5% 3.4% 5.2% 5.4% -4.8% 4.4% 5.8% 3.2% 2.0% -2.6% 3.2% 1.8% 2.3% 3.5% 2.8% 3.8% 3.4% -5.2% 0.3% 5.2% 0.2% 1.5% Lowest ● We look to hold assets -5.3% -3.5% -1.0% 1.2% 1.5% -9.2% 3.1% 2.1% -26.6% -3.7% 0.3% -1.8% 0.2% return that suit the economic Emerging market debt Investment grade corporate bond environment and that offer value Treasuries Cash Global High yield corporate bonds Source: Investec Asset Management, Bloomberg BBA 1 month LIBOR, Citigroup Treasury Index, Citigroup WGBI-ex US, JP Morgan ELMI+ in USD to 2003, JP Morgan GBI-EM Global Diversified in USD from 2003, Merrill Lynch Global HY Index hedged into USD, Merrill Lynch Global Corporate Index hedged into USD Page 17 | CONFIDENTIAL 12573
  • 18.
    Overall expect lowerand narrower returns, but opportunities still exist Expected 12 month returns Cash 5.0% Bonds/ILB’s 6.8% Corporate 8.8% CPI 5.8% Property yield 7.4% Page 18 | CONFIDENTIAL 12573
  • 19.
    Investec Asset Management SouthAfrican Funds – core range Fixed Income Multi-Asset Equity Value Equity Expected Return Managed Opportunity Cautious Managed Diversified Income Opportunity Income Absolute Income Money Market Low Moderate High Volatility Page 19 | CONFIDENTIAL 12573
  • 20.
    SA fixed incomefunds Different strategies have different objectives Fund strategy Investec Fund Sector Money market alternatives Investec Absolute Income SA Multi-Asset Income Domestic only – Fixed Income Investec Opportunity Income SA Multi-Asset Income Solution Complete - Fixed Income solution Investec Diversified Income SA Multi-Asset Income (incl. international) Page 20 | CONFIDENTIAL 12573
  • 21.
    Globally integrated fixedincome investment team SION 01/12/11 We are unique to the SA market Text size 15 Main W 16 Fixed Income & Currency Capability Leaders ● Globally integrated team Second W 8 John Stopford – Co-Head of André Roux – Co-Head of Global Global Fixed Income Fixed Income ● 37 investment professionals Photo 2.2 Textbox 5.8 Multi-strategy & Developed Markets Emerging Markets ● Average of 13 years Text size 12 Peter Eerdmans – Emerging Markets John Stopford – Allocation & Debt & Currency investment experience Spacing 0.1 Text size 12 Developed Credit 12 Investment Specialists 4 Investment Specialists ● Specialist teams with 8 Main W 16 Second W clear Malcolm Charles – Southern African Rates accountability and 4 Investment Specialists Photo 1.4 Russell Silberston – Developed responsibility Textbox 6.6 Rates & Currency Simon Howie – Text size 11 7 Investment Specialists South Africa & Frontier Credit 4 Investment Specialists André Roux Economic Research Thanos Papasavvas Fixed Income & Currency Strategist 5 Fixed Income & Currency Dealers Page 21 | CONFIDENTIAL 12573
  • 22.
    Investec Absolute IncomeFund Compelling alternative to money market Annualised performance 10% Investec Absolute Income 9% SA money market sector average 8% 7% 6% 5% 4% 3% 2% 1% 0% 1 year 3 years p.a. 5 years p.a. Since inception* Investec Absolute Income 7.1% 7.1% 8.6% 8.8% SA money market sector average 5.4% 5.9% 7.7% 8.0% Source: Morningstar as at 31 December 2012. Returns are calculated on a bid-to-bid basis, net of fees, with gross income reinvested. Market indices are gross of fees. Periods less than one year are not annualised. *Inception date: 1 July 2003 Page 22 | CONFIDENTIAL 12573
  • 23.
    Investec Diversified IncomeFund Complete fixed income solution ● A diversified fixed income retail fund, established in 2008 ● Globally integrated approach drawing on the best investment ideas from the SA and London teams ● Diversified strategic allocation to multiple sources of uncorrelated fixed income returns ● Actively manages the asset allocation between cash, government bonds, inflation linked bonds, corporate bonds and listed property in SA and abroad ● Offshore assets are actively managed with currency hedging Page 23 | CONFIDENTIAL 12573
  • 24.
    Investec Diversified IncomeFund Complete fixed income solution for SA investors Portfolio allocation Corporate bonds: Inflation- Property, Overweight (40%) Linked Bonds, 2.0% 1.0% Foreign Exposure (incl. Credit linked Corporate notes): Bonds, 15.0% Government Bonds, 24.0% Actively managed Floating Rate Money market: Notes, 23.0% NCDs = higher income yields and liquid Money Market Government bonds and Property: (NCDs), Foreign 22.0% Underweight Exposure, 13.0% Duration: 1year and 3 months Yield: 5.8% Source: Investec Asset Management 22 February 2013 Page 24 | CONFIDENTIAL 12573
  • 25.
    Investec Diversified IncomeFund Complete fixed income solution for SA investors 12% 10% 8% 6% 4% 2% 0% 3 months 1 year 3 years p.a. Investec Diversified Income 1.8% 9.6% 9.8% ALBI 1-3 1.3% 5.5% 6.8% STeFI 1.3% 5.5% 6.0% Source: Morningstar as at 31 January 2013. Returns are calculated on a bid-to-bid basis, net of fees, with gross income reinvested Inception date: 29 August 2008 Page 25 | CONFIDENTIAL 12573
  • 26.
    Summary ● Challenging macroeconomicconditions prevail − Low / negative real returns − Lower and narrower returns from SA income assets ● Opportunities exist − Active management − Corporate credit − Global diversification ● Investec Asset Management offers a globally integrated and experienced team managing a complete fixed income solution Page 26 | CONFIDENTIAL 12573
  • 27.
    Biographies Sumesh Chetty Years updated 2013 Portfolio Manager 6 years with the firm 11 years of industry experience Sumesh is a portfolio manager at Investec Asset Management with responsibility for our absolute return strategies. He is co-portfolio manager of the Investec Cautious Managed Fund and the Investec Absolute Balanced Fund. He joined the firm in 2007 from Metropolitan Asset Managers where he managed the Metropolitan Absolute Return Fund from 2005. Before joining Metropolitan, Sumesh spent three years as an investment actuary at Metropolitan Employee Benefits, where he was responsible for managing smooth bonus funds. Sumesh began his career at Swiss Re Life & Health, where he spent over three years as an actuarial specialist. Sumesh graduated from the University of Cape Town with a Bachelor of Business Science (Honours) degree in Actuarial Science and a Post Graduate Diploma in Actuarial Science. He is also a Fellow of the Institute of Actuaries in the United Kingdom. Page 27 | CONFIDENTIAL 12573
  • 28.
    It wasn’t the endof the world… So what now? Sumesh Chetty, Portfolio Manager
  • 29.
    Agenda ● Our investmentphilosophy ● Challenges facing investors ● Implications for portfolio construction Page 29 | CONFIDENTIAL 12573
  • 30.
    South Africa AbsoluteReturn team Co-Chief Investment Officers - John McNab, Domenico Ferrini Experienced Portfolio Managers – 20 managers Equity Fixed Income Absolute Return Growth: Richard Middleton André Roux, John Stopford Clyde Rossouw Value: John Biccard, Rajay Duration: Malcolm Charles Sumesh Chetty Ambekar High Income: Vivienne Taberer Active Quants: Grant Irvine-Smith Cash: Lisa McLeod General: Chris Freund Credit: Simon Howie, Marshall Sector: Angelique de Rauville, Neil Brown, Steven Loubser Clyde Rossouw Sumesh Chetty 14 years with the firm 6 years Investec Stuart-Findlay 19 years experience 11 years experience RI: Malcolm Gray Common research platform – 21 analysts Implementation and pre-trade compliance – 3 members Dealing – 5 dealers Performance measurement, attribution & risk – 6 analysts As at November 2012 Page 30 | CONFIDENTIAL 12573
  • 31.
    Investec Opportunity Fund Longterm consistent outperformance Investec Opportunity Fund relative to new sector: South Africa Multi Asset – High Equity Source: Morningstar as at January 2013. Page 31 | CONFIDENTIAL 12573
  • 32.
    Investec Opportunity andCautious Managed Funds A proven investment process Risk vs Return scatterplot: 10 years to 31 December 2012 19% Risk-cognisant Investec Opportunity 17% SA equity general sector average 15% SA AA variable equity Return p.a. 13% sector average 11% Quality-centric SA Bond sector average 9% SA Money Market sector Foreign equity general 7% average sector average 5% 0% 2% 4% 6% Valuation-bias 8% 10% 12% 14% 16% Standard Deviation p.a. Source: Morningstar as at 31 December 2012. Returns are calculated on a bid-to-bid basis, net of fees, with gross income reinvested. Market indices are gross of fees. Page 32 | CONFIDENTIAL 12573
  • 33.
    Investec Opportunity andCautious Managed Funds Our investment philosophy Outperforming inflation with the lowest possible risk Risk is defined primarily as the risk of losing money Downside volatility is more detrimental than overall volatility Page 33 | CONFIDENTIAL 12573
  • 34.
    The rules ofabsolute investing Rule number 1: Never lose money Rule number 2: Never forget rule # 1 Why? R 100 R 100 -30% +43% R 70 Start Year 1 Year 2 Page 34 | CONFIDENTIAL 12573
  • 35.
    High quality opportunitieswith a valuation bias ● We prefer predictable cash flows over Brand / Balance uncertainty Cash Flow Competitive Management Sheet Advantage ● We only buy uncertainty if paid handsomely for it ● ‘Cheap’ is not ‘value’ Quality ● We prize franchise value highly ● We do not change our minds often Emphasis on quality and consistency to ensure long-term sustainable growth Page 35 | CONFIDENTIAL 12573
  • 36.
    It wasn’t theend of the world… So what now? We are cautiously optimistic • Global risks still remain • Local risks have increased • Market sentiment appears overly bullish Select opportunities can still be found Page 36 | CONFIDENTIAL 12573
  • 37.
    % 12573 10 12 14 16 18 20 6 8 Jan-94 Jun-94 Nov-94 Apr-95 Sep-95 Feb-96 Page 37 | CONFIDENTIAL Jul-96 Dec-96 May-97 Oct-97 Mar-98 Source: I-Net Bridge, to 31 December 2012. Aug-98 Jan-99 Limited potential returns Jun-99 Nov-99 Apr-00 Sep-00 Feb-01 Jul-01 Dec-01 Bond yields at historic lows May-02 Yield on the generic 10 year government bond Oct-02 Mar-03 Aug-03 Jan-04 Jun-04 Nov-04 Apr-05 Sep-05 Feb-06 Jul-06 Dec-06 May-07 Oct-07 Mar-08 Aug-08 Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12
  • 38.
    Low short termrates resulting in negative real returns Source: Investec Asset Management Page 38 | CONFIDENTIAL 12573
  • 39.
    Investec Cautious ManagedFund Putting your cash to work – the search for real income Inflation-linked bonds as an alternative to cash 120 118 116 114 112 110 108 106 104 102 100 Mar-12 Apr-12 May-12 Jul-12 Feb-12 Oct-12 Jan-12 Jun-12 Aug-12 Sep-12 Nov-12 Dec-12 Inflation-linked bonds Cash Source: I-Net Bridge; Investec Asset Management to 31 December 2012. Page 39 | CONFIDENTIAL 12573
  • 40.
    Building a betterbond portfolio Our best Inflation Linked Bond British American Tobacco PLC • Global tobacco manufacturer with dominant position in many international markets • 35% ROE and Operating Margins of 35% • Global Drive Brands (Dunhill, Pall Mall, Kent, Lucky Strike) – the key drivers of growth • On-going share buybacks • Dividend Yield of 3.8% • FCF yield of 4.8% Earnings per share growth of 12% p.a. Dividends per share growth of 14% p.a. Page 40 | CONFIDENTIAL 12573
  • 41.
    12573 0.5 0.7 0.9 1.1 1.3 1.7 1.5 Jan-03 Apr-03 Jul-03 Oct-03 Source: I-Net Bridge. Jan-04 Page 41 | CONFIDENTIAL Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Resources relative to Industrials Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 relative to industrials Resources expensive Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Resources cheap Jan-12 relative to industrials Apr-12 Jul-12 Stretched valuations in select parts of the SA equity market Oct-12 Jan-13
  • 42.
    Bottom-up stock selection HistoricPE and subsequent real total returns Investec Opportunity Fund ALSI Source: I-Net Bridge. Page 42 | CONFIDENTIAL 12573
  • 43.
    Investec Opportunity Fund Qualitycompanies, reasonable valuations Top 10 holdings as % of fund Company % Assore 5.7 British American Tobacco 3.9 Sasol 3.5 MTN Group 3.2 Newgold Issuer 3.2 Tiger Brands 3.0 Impala Platinum Holdings 2.6 Steinhoff International Holdings 2.5 Santam 2.0 Richemont 1.7 Total 31.3 Source: I-Net Bridge and Investec Asset Management as at 31 December 2012 Page 43 | CONFIDENTIAL 12573
  • 44.
    Associated Ore A greatasset in our portfolio, held for 8 years 2.5 Assore’s profits have grown faster than Anglos by 20% p.a. But you still only pay 10 times 2 earnings! 1.5 EPS T12M (ASR/AGL) Anglo shares outstanding have grown 6X Last Px (ASR/AGL) Before buying back shares in 2007 1 0.5 0 No change in Assore since 1950 2000/06/01 2001/02/01 2001/10/01 2002/06/01 2003/02/01 2003/10/01 2004/06/01 2005/02/01 2005/10/01 2006/06/01 2007/02/01 2007/10/01 2008/06/01 2009/02/01 2009/10/01 2010/06/01 2011/02/01 2011/10/01 2012/06/01 11 11 Source: I-Net Bridge Page 44 | CONFIDENTIAL 12573
  • 45.
    12573 "Cash costs+sustaining capex" (R/5PGE+Au oz) 2,000 4,000 6,000 8,000 10,000 12,000 14,000 0 Mimosa Two rivers Platinum Mile Page 45 | CONFIDENTIAL Zimplats Mototolo West tailings Modikwa Marula R10,500/ounce Impala Boschkoppie Mogalakwena Platinum industry cost curves Amandelbult Impala Platinum is our preferred platinum stock Kroondal Union Lonmin Northam Rustenburg Marikana CTRP
  • 46.
    SA specific riskshave been on the rise • Labour unrest 9.5 • Rating agency downgrades 9.0 • Rand depreciation 8.5 • Political uncertainty • Risk of foreign outflows 8.0 7.5 7.0 May-12 May-12 Apr-12 Feb-12 Mar-12 Mar-12 Jul-12 Jul-12 Oct-12 Oct-12 Aug-12 Sep-12 Nov-12 Dec-12 Dec-12 Jan-12 Jan-12 Jun-12 Jan-13 Source: I-Net Bridge. Page 46 | CONFIDENTIAL 12573
  • 47.
    Offshore Equity High qualityglobal franchises at attractive valuations Top 10 Name Weight PE FCF Yield DY EM % Sales Nestlé (Nescafe, Maggi ,Nesquik) 5.6% 16.6 4.5 3.7 41% Japan Tobacco (Camel, Winston, Mild Seven, B&H) 5.1% 13.4 11.4 3.0 28% Samsung Electronics (Samsung) 4.8% 8.2 4.8 0.6 75% Imperial Tobacco Group (Davidoff, Gauloises, West) 4.8% 11.1 5.8 4.9 40% Microsoft Corp (Windows, Office, Xbox, Bing) 4.5% 8.8 11.7 3.5 13% Reckitt Benckiser Group (Nurofen, Finish, Vanish, Dettol, Strepsils) 4.4% 12.5 6.6 3.4 35% Unilever (Axe, Knor, Blue Band, Lipton, Dove, Lux, Flora, Omo) 4.4% 17.2 5.4 3.4 55% Anheuser-busch Inbev ( Budweiser, Beck's, Stella Artois ) 4.3% 17.4 7.7 2.6 56% International Business Machines (IBM) 4.1% 11.7 6.8 1.8 21% Coach (Coach) 4.0% 14.1 6.6 2.1 13% Total/Average 46.0% 13.1 7.1 2.9 37.7% Source: Investec Asset Management to 31 December 2012. Page 47 | CONFIDENTIAL 12573
  • 48.
    Nestlé – thequintessential franchise stock Nestle has outperformed the market through multiple EM is adding 1bn new emerging market consumers by cycles due to compounding and steadily increasing 2020 exposure to EM Share price: source of 1973 - 2012 return 7 000 50 6 000 45 Business (profit) growth 8.1% 40 5,000 5 000 Valuation uplift 2.7% 35 % of sales Population (m) 4 000 30 CAGR % 13.1% 25 3 000 20 2 000 15 10 1 000 Log scale 5 500 0 0 2000 2005 2010 2015 2020 % of Nestle Sales EM Population (Million) Develop Market Population(Million) 50 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Feb-97 Feb-98 Feb-99 Mar-01 Mar-02 Mar-03 Mar-04 Feb-96 Feb-00 Mar-05 May-11 May-12 Jan-90 Jan-92 Jan-93 Jan-94 Jan-91 Jan-95 MSCI World Nestle Source: DataStream, company data, Investec Asset Management, USD Total Return Index This is not a buy or sell recommendation for any particular stock Page 48 | CONFIDENTIAL 12573
  • 49.
    Investec Cautious ManagedFund Income generation and real returns at lower volatility Commodities - ● High quality stocks to provide real Offshore - gold SA Equities capital growth in volatile markets cash 4.5% with lower levels of risk 3.5% Domestic - cash Domestic - 29.4% ● Preferred asset class equities 18.7% Offshore ● High quality global franchises on Equities attractive valuations ● Uncorrelated returns – provides Gold protection in uncertain markets Offshore - equities 18.9% Domestic - SA Fixed ● Bonds and ILBs provide a superior bonds return to cash which yields a 25.0% interest negative real return Source: Investec Asset Management as at 31 December 2012 Page 49 | CONFIDENTIAL 12573
  • 50.
    Investec Opportunity Fund Longterm real wealth creation Investec Opportunity Fund ● High quality stocks to provide real Domestic - property, 0.7% SA Equities capital growth in volatile markets Offshore - Domestic - with lower levels of risk bonds, 2.6% equities, Offshore - 41.6% cash, 3.1% ● Preferred asset class Commodities - Offshore ● High quality global franchises on Gold, 3.2% Equities attractive valuations Domestic - bonds, 14.9% ● Uncorrelated returns – provides Gold protection in uncertain markets Domestic - cash , 15.8% Offshore - SA Fixed ● Bonds and ILBs provide a superior equities, 18.1% return to cash which yields a interest negative real return Source: Investec Asset Management as at 31 December 2012 Page 50 | CONFIDENTIAL 12573
  • 51.
    Superior long-term returns Afocus on risk, quality and valuation 19% Investec Opportunity Risk 17% SA equity general sector average cognisant 15% SA AA variable equity Return p.a. 13% sector average Quality 11% centric SA Bond sector average 9% SA Money Market sector Foreign equity general 7% average sector average Valuation bias 5% 0% 2% 4% 6% 8% 10% 12% 14% 16% Standard Deviation p.a. Source: Morningstar as at 31 December 2012. Page 51 | CONFIDENTIAL 12573
  • 52.
    Investec Asset Management InternationalFunds – Core Range Global Fixed Income Global Multi-Asset Global Equity Global Strategic Equity (USD) Worldwide Equity Feeder (ZAR) Expected Return Global Equity (USD) Global Equity FoF (ZAR) Global Franchise (USD) Global Strategic Managed Feeder (ZAR) Global Strategic Managed (USD) Global Opportunity Income FoF (ZAR) Money Market (USD, EUR, GBP) Low Moderate High Volatility Page 52 | CONFIDENTIAL 12573
  • 53.
    Investec GSF GlobalFranchise Fund ● Highly differentiated 'global franchise' philosophy ● Concentrated portfolio and not benchmark constrained ● Low historic correlation with traditional benchmarks ● Record of long-term outperformance: − participating meaningfully in up markets − with smaller draw-downs in down markets − lower than average absolute volatility ● Managed by a globally integrated investment team based in London and Cape Town We seek to invest in companies with business models which can provide some certainty in uncertain markets Page 53 | CONFIDENTIAL 12573
  • 54.
    Investec GSF GlobalFranchise Fund Performance track record Annual performance in USD Cumulative performance in USD 40% 36.1% 40% 30.0% 28.8 30% 30% 14.7% 16.1% 20% 20% 11.8% 5.9% 7.4% 10% 10% 5.9% 5.3% 0.3 3.9% 4.6% 0% 0% -10% -10% -5.9% -20% -20% -30% -30% -40% -40% -32.6% -50% -50% -40.7% -60% 2007 (Apr) 2008 2009 2010 2011 2012 2013 (YTD) Apr 07 Jan 08 Oct 08 Jul 09 Mar 10 Dec 10 Sep 11 Jun 12 Feb 13 Investec GSF Global Franchise A Acc Investec GSF Global Franchise A Acc MSCI AC World NR (MSCI World NR pre 1/10/11) MSCI AC World NR (MSCI World NR pre 1/10/11) Since inception 1 month 3 months YTD 1 year 3 years p.a. 5 years p.a. p.a.* Investec GSF Global Franchise A Acc 1.2% 5.2% 5.3% 13.6% 11.6% 5.6% 5.0% MSCI AC World NR (MSCI World NR pre 1/10/11) 0.0% 7.0% 4.6% 9.3% 9.5% 1.4% 0.4% Relative performance 1.2% -1.8% 0.7% 4.4% 2.1% 4.2% 4.6% Quartile ranking 1 3 2 1 1 1 1 Past Performance figures are not audited and should not be taken as a guide to the future Source: Lipper, dates to 28 February 2013, NAV based, (inclusive of all annual management fees but excluding any initial charges), gross income reinvested, in USD *Inception date: 10 April 2007 Page 54 | CONFIDENTIAL 12573
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  • 56.
    Disclaimer This document orany of its content may not be in whole or in part, be copied, modified, distributed, retransmitted, redistributed, or released to any third party. The user represents and warrants that it will not use or permit the use of the document or any of its content for any purpose other than authorised internal use and warrants that it will not, without the prior written consent of Investec Asset Management, directly or indirectly redistribute, or knowingly facilitate redistribution of, all or any portion of the document. All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an advisor or in a fiduciary capacity. No one should act upon such information or opinion without appropriate professional advice after a thorough examination of a particular situation. We endeavour to provide accurate and timely information but we make no representation or warranty, express or implied, with respect to the correctness, accuracy or completeness of the information and opinions. We do not undertake to update, modify or amend the information on a frequent basis or to advise any person if such information subsequently becomes inaccurate. Any representation or opinion is provided for information purposes only. Investec Asset Management will not be held liable or responsible for any direct or consequential loss or damage suffered by any party as a result of that party acting on or failing to act on the basis of the information provided by or omitted from this document. This document may not be amended, reproduced, distributed or published without the prior written consent of Investec Asset Management. In the event that specific collective investment schemes in securities (unit trusts) are mentioned please refer to the relevant fact sheet in order to obtain all the necessary information in regard to that unit trust. Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to the future. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of charges, fees and adviser fees is available on request from the manager. Additional adviser fees may be paid and if so, are subject to the relevant FAIS disclosure requirements. Forward pricing is used. The scheme trustee is FirstRand Bank Ltd (011) 371 2111. Certain Investec Asset Management funds are offered as long-term insurance policies issued by Investec Assurance Limited, a registered insurer in terms of the Long-term Insurance Act. Investec Asset Management is an authorised financial services provider. Page 56 | CONFIDENTIAL 12573